Trading Scenarios

I primarily use 18 ETFs for my trading. I use very short-term trending (hourly charts) and medium-term charts (daily) for most of my trading. For trending I look at the MACD and the simple moving averages. I also review RSI and support/resistance levels but as secondary indicators.

Here are how my 18 instruments look like right now from a short-term perspective:

As I had discussed yesterday, markets are at oversold levels and sentiment has been very negative. We had a small bounce yesterday and I was able to take some gains out of that. I expect a choppy week and so all trading I do will be very nimble. I am not going to be married to any position as markets seem to move on a dime.

Here is the medium-term heat map of the same 18 instruments:

This map tells us that everything is oversold, and we are still ready for a bounce. The XLU looking like a buy is a sign of the markets being oversold as well. And same with GLD. Although GLD strength may be waning a bit.

In the hourly charts we can see some indications of a bounce. Whether this bounce continues through the week remains to be seen. The SPY and QQQ are both leading this bounce for now. The IWM is very weak and tells its own story.

Strategy:

I am very cautious at this time as there is a potential for a trend change. Trend changes or reversals are very difficult to trade, and I become extra cautious in these situations preferring to wait. Any trade I make will be based on looking at the hourly charts and likely be very short term. Also, in these situations I prefer to trade the larger markets - QQQ and IWM for diversification.